Sky Dayton's Long Road to Internet Nirvana

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Sky Dayton's Long Road to Internet Nirvana

THE LONG ROAD TO INTERNET NIRVANASky Dayton brought dialup access with EarthLink. Then he bet big on eCompanies. (Don't ask.) Now Boingo promises to deliver wireless broadband for the masses. Won't someone build a nationwide network for this man?

FRESH FROM A MORNING SURF off the coast of Malibu, the maharishi of the wireless Internet shows up at the Beverly Hills Four Seasons sporting a rumpled T-shirt and Mayan sandals. It's an outfit more popular among aging head shop owners than youthful tech moguls, but Sky Dylan Dayton likes to live up to his Age of Aquarius name.

Besides, the Wavy Gravy getup is crucial to Dayton's offbeat allure. His man-of-the-people sales patter could seem corny coming from a member of the Brooks Brothers set. But those sandals. The puppy-dog eyes. The nervous throat clearing. Dayton's a master at playing the lovable tech savant. "I don't see myself as a programmer. I'm a user," he insists, always careful to poor-mouth his technical credentials. "I'm that person struggling to get connected, that person who feels their oxygen supply has been cut off whenever I can't get connected. I live that."

Dayton, who founded EarthLink eight years ago, is working his everyman routine to promote Boingo, his new ISP for the Unstrung Era. Boingo sells Internet access via Wi-Fi, the short-range wireless technology that broadcasts 11-megabit-per-second broadband over radio waves. Conceived as a way for sysadmins and home networkers to eliminate pesky cables, Wi-Fi nodes have found their way into conference rooms and living rooms alike. Now they're spreading beyond private spaces. Geek hobbyists are popping networks up on windowsills and fire escapes, pointing Wi-Fi antennas at adjacent parks, bars, and wherever else city dwellers might dig free bandwidth. Dayton is betting that businesspeople want to surf sans wires, too, especially while on the road, and that they'll shell out $75 a month for the privilege.

But, as numerous failed entrepreneurs can attest, capitalizing on a snazzy new technology is trickier than it sounds. In Boingo's case, bringing wireless Internet access to the masses raises a host of problems. For starters, there's the infrastructure — or, more precisely, the lack thereof. If Boingo is going to sell access to a far-flung wireless network, it first needs a far-flung wireless network. That's not as easy as scattering cellular transponders along the highway. Whereas a single cell switching station can cover an entire town, most Wi-Fi signals peter out after a few hundred feet. As a result, we'll need tens of thousands of nodes nationwide before coverage can be considered even minimal. Wi-Fi's first big commercial venture, MobileStar, went bankrupt while putting access points — which can cost $4,000 each — in 550 Starbucks. Deploying a network powerful enough to cover a good-size airport can run well over $500,000. And deep pockets aren't enough. Before the buildout can happen, someone needs to convince the bureaucrats who operate the hotels and airports — critical locations for Boingo's target customers — that a Wi-Fi network can be a revenue-generating magnet for business travelers.

If Dayton's discouraged by the obstacles between him and another EarthLink-level success, he's not showing it. "Wi-Fi will soon be built into everything — laptops, phones, tape recorders, consumer electronics," he says, leaning back from his ThinkPad as it loads a Web site devoted to his newest hobby, kitesurfing. "It's like trying to imagine all the things we'd use with electricity before electricity had been invented." Once that happens, his theory goes, the formula that helped EarthLink succeed will kick in. As with EarthLink, Boingo provides the software and support that make using Wi-Fi no more complex than playing Minesweeper. Need to check your email while stuck in a layover at Hartsfield or O'Hare? Fire up your laptop, and Boingo code will sniff out the nearest affiliated node, then automatically log you on. Worried about hackers? The service offers a Personal VPN option. Wondering whether a hotel has Boingo? Look for the red, white, and blue decal in the window. It's that easy.

"Wi-Fi will be built into everything," says Dayton. "It's like trying to imagine all the uses for electricity before it was invented."

Dayton is already planning an ambitious phase two: the untethering of Joe Six-Pack. He sees millions of ordinary Americans putting Wi-Fi cards in their laptops and base stations in their dens. Hooked on wireless connections at home, they're bound to crave similar service on the go. So Dayton is selling Boingo's $895 do-it-yourself kit — a service package, marketing materials, and a plug-and-play setup — to owners of burger shops, bookstores, and bowling alleys. The pitch is simple: Every time a Boingo subscriber taps into your node, you get a $1 bounty. It's a twist on his original plan for EarthLink, which partnered with hundreds of mini-ISPs en route to 5 million subscribers. "We direct traffic to you, we generate revenue for you," says Dayton, breaking it down as he does for potential partners great and small. "You don't have time to do tech support calls, you don't have time to bill people, or even to market and let people know the network is there."

The early numbers, Dayton claims, prove that his EarthLink model will work in the wireless realm. Boingo "is a lot further along" than EarthLink was at the nine-month mark, he crows. "I don't need to reinvent the wheel if it's already been invented."

"Bongo? What is this Bongo?"

The French receptionist at the Pierre, one of New York's most opulent hotels, just off Central Park, is mystified. I'm hoping to give Boingo's service a test-drive, and the company's Web site lists the Pierre's lobby as one of Manhattan's three Boingo hot spots. But no one I speak to inside the hotel's marbled halls has the vaguest idea what I'm talking about. Do I mean the Ethernet in the conference room? The data jacks on the room phones? Wi-Fi? Huh?

I'm sent to the concierge, who greets me with a similarly quizzical expression and places an anxious call to the Pierre's sysadmin. "I see ... an error, yes ... ah, we did already ... yes, an error."

He turns back to me and clucks disapprovingly. No luck, he says. If there's a Boingo node here, no one seems to have a clue about it. "Apparently, we've contacted them about this already, but they have done nothing." Apologizing for the mix-up, he hands me a brochure for a nearby Internet cafá that offers a half hour of Web time for 50 cents — a much better deal, even if it involves cables, than Boingo's $7.95 per-use fee for nonsubscribers.

I fare no better at the Four Seasons, on East 57th Street. Again, the front desk is addled when I inquire about Boingo, even though the swanky hotel chain is repeatedly touted in Boingo's marketing literature. A receptionist disappears for a spell, and I scan the lobby for any hint that Boingo is in the air — a sign, a pamphlet, a 2-inch decal. Nothing. A minute or two later, the receptionist reappears with grim news: I can't log on from the lobby — access is restricted to the business center. She asks if I'm a guest. At $500 a night for a double? Uh, no. Then, alas, I'll have to go Boingo elsewhere.

Anthony MandlerSky DaytonThe third Manhattan hot spot is way uptown, on Claremont Avenue near West 125th Street. Rather than brave multiple subway rides on a muggy day, I end the Boingo experiment and stroll south to Bryant Park, behind the New York Public Library. NYCwireless, a local networking project, has blanketed the park — plus nearly 100 other Gotham locales — with gratis Wi-Fi service, installed and maintained by unpaid friends-of-the-park volunteers. I plop down on the lawn and use Windows XP's integrated sniffer to latch onto the nearest signal. In 90 seconds, I'm watching the highlights of last night's Yankees game via streaming video on a 1.5-Mbps connection. Best of all, the hiccup-free hookup doesn't cost a dime.

My Big Apple Wi-Fi caper neatly encapsulates Boingo's plight. When the company launched in January, its network consisted of 400 hot spots. By year's end, Dayton promised, the number would be closer to 5,000. But at the halfway point, there were barely 600 locations listed in the database, and some crucial cities — notably Seattle and New York — were hardly covered at all.

The list of Boingo's current sites lacks several obvious m-worker beachheads. There's no sign of Boingo at JFK, SFO, or O'Hare. Even in airports where Boingo's made headway, like Chicago Midway and Boston's Logan, the nodes are usually clustered at gates used by AirTran, a discount carrier. Chichi hotels like the Four Seasons have signed up, but places like the Comfort Inn, where business travelers who don't have "chief" in their title tend to stay, have not. What are the chances an AirTran flier will ever stay at the Four Seasons, or vice versa? It seems like an ill-conceived mix.

When I ask Boingo president David Hagan about expansion plans, he assures me that the company is "in negotiations with 40,000 hot spots." I note that a recent InStat/MDR study estimates there won't be 40,000 public hot spots, total, worldwide, until 2006. "I think that's very low. Absolutely. We've [calculated] how many public spaces there are, by category, and it's over a million."

Whatever the actual count, a growing number of those locales have already begun offering free Wi-Fi access. Boingo has approached such community projects, like NYCwireless, and offered to list their nodes on Boingo.com as a public service. But several groups have nixed the deal as disingenuous, a sneaky way of implying to Boingo customers that the hookups are really part of the Boingo network. "They just want to make it appear as if they have a wide footprint when they really don't," says Terry Schmidt, cofounder of NYCwireless. "It creates the wrong impression that their users are getting these nodes as part of the money they pay, when they're really just free."

The sandals, Dayton explains, can be blamed on his out-there parents, a poet and a sculptor. "I was raised on vitamins and whole-grain Pritikin bread," he says. "You know, stuff that was kind of hippie, kind of edgy in the '70s." A talented artist in his own right, Dayton as a teen dreamed of becoming an animator. During an internship arranged by the Delphian School, an Oregon institute associated with the Church of Scientology, he helped draw the Elephant Man skeleton for Michael Jackson's "Leave Me Alone" video. (A lifelong devotee, Dayton credits Scientology with helping him to "not have a lot of baggage.") But he soon realized his bravado was better suited to business. He snagged his first computer job, at a Burbank, California, advertising agency, by lying about his proficiency with QuarkXPress 1.0, a program he'd never used; three months later, he was head of the graphics department.

Wireless ISPs won't reallytake off until airports — teeming with salarymen pining for email — hop on the Wi-Fi bandwagon.

EarthLink lore holds that Dayton founded the ISP in 1994 after spending 80 futile hours trying to log on to the Internet. He printed customer invoices using Word, personally handled tech-support calls, and pitched small ISPs on EarthLink's master plan — you provide the backbone, we'll handle details like marketing, billing, and customer service.

Ever the competitor, Dayton quickly began gunning for AOL. He ran "Get Out of AOL Free" promotions and publicly lampooned the online Goliath as the Borg. In 1995, Dayton roiled the industry with the first flat-rate service, at a time when AOL was still charging by the hour. Although Dayton remains EarthLink's chair, holding 3.6 million shares in the company, he left day-to-day operations in 1999, with his celebrity — and the dotcom bubble — at a peak.

Dayton's next triumph was supposed to be eCompanies, the incubator he cofounded in 1999 with Jake Winebaum, a snowboarding chum who headed Disney's new media division. "Very few entrepreneurs have built multibillion-dollar Internet companies, and Jake and I are two of them," he boasted just prior to eCompanies' debut. Backed by $160 million in venture capital from the likes of Goldman Sachs, Times Mirror, and George Soros' hedge fund, Dayton and Winebaum predicted that they could churn out a new company every 90 days. One wall of their Santa Monica headquarters was decorated with an icon of a money truck — several times bigger than a mere money bag, Dayton explained, and thus more appropriate to their ambitions.

Two years later, eCompanies had become the poster child for new economy excess, renowned for (though not alone in) squeezing out half-baked ideas with no discernible means of revenue. Web sites like eParties, an invitation service suggested by Winebaum's young daughter, and eMemories, the zillionth online photo album, were duds. eCompanies' low point came when it paid a cybersquatter a record $7.5 million for the business.com domain, an investment that Dayton declared was "going to be the bargain of the century. It's going to look like we bought the island of Manhattan for $7.5 million and some beads." As a pay-for-placement portal, Business.com has limped along, barely registering in Media Metrix's rankings.

Dayton downplays the flameout. He blames the incubator's many fiascoes on the money. "An overabundance of capital," he says, nurtured the creation of bloated, not-ready-for-prime-time startups.

With Boingo, there was no talk of 90-day insta-companies, no hiring binges, no Goldman Sachs financing. Dayton rounded up a crew of EarthLink cronies, including CTO Niels Jonker, to write the software, and recruited Hagan, the former president and COO of Ticketmaster CitySearch, to be president. The rest of the skeletal staff was packed with loyalists of Dayton, whose name still carries weight in tech circles.

In fact, the one thing that truly differentiates Boingo from competitors like Joltage and Sputnik is Dayton himself. He's already been an invaluable asset to the company as it pursues a software-saturation strategy similar to the one pioneered by EarthLink nemesis AOL. Within months of its January launch, Boingo had a deal to bundle its software with Hewlett-Packard laptops. (About 15 percent of laptops now come with integrated Wi-Fi hardware.) Soon, the startup discs for OriNoco Wi-Fi adapter cards, manufactured by Lucent spinoff Agere, will include Boingo's client software. And EarthLink now offers its 5 million customers a Boingo-powered wireless option.

"Sky's at least two steps ahead of everybody, and that's a function of what he learned at eCompanies," says Stewart Alsop, a pal of Dayton and general partner of VC firm New Enterprise Associates, a Boingo investor. "He was able to translate that pain of failure into an attitude of 'Hey, let's not spend any more time or money on companies that aren't going to be productive.'"

ACCESS ON THE FLY

Minneapolis-St. Paul became one of the most Wi-Fi-friendly airports in the nation with the installation of a $350,000 network in June. Twenty-five nodes salted throughout the facility provide wide coverage. For JFK or Hartsfield, a similar level of service would require as many as 100 nodes and cost as much as $1 million to install. By comparison, a cellular carrier can blanket MSP with a single transponder.

Wireless ISPs won't move past the novelty stage until airports hop on the Wi-Fi bandwagon. No other locations see such high volumes of salarymen, all pining for email as they wait for flights. For Boingo, San Francisco International is the ultimate prize. Yes, its 40 million passengers each year are a lure. Yet SFO's killer location, just a few miles south of the nation's most wireless city and a few miles north of Silicon Valley, means its greatest value is symbolic. A nationwide Wi-Fi network that doesn't include SFO is like a chain of cheese-steak stands without a presence in Philadelphia.

Being newbie-friendly may be Boingo's biggest selling point. But $75 a month will seem steep when Microsoft jumps in.

The budding Wi-Fi industry has been hip to SFO's importance for a while. Three years ago, a Bay Area startup called Aerzone bid an eye-popping $2 million for the rights to build a handful of Laptop Lane Wi-Fi kiosks. But the firm went bust before it ever installed a node; its assets were purchased by an Austin, Texas-based rival, Wayport, which promptly pulled out of the SFO arrangement. MobileStar managed to put a Wi-Fi network in American Airlines' Admirals Club lounges before it, too, went belly-up.

Twice bitten by immature business models, John Payne, the airport's ponytailed CIO and fussy technological gatekeeper, has slowed SFO's Wi-Fi march to a crawl. It's not the straightforward installation process or even the capital outlay that worries him. As we stroll through one of SFO's chaotic terminals, he envisions a coverage plan that could be easily handled by Wayport or Airpath, two Boingo partners responsible for the dirty chore of network deployment. "It's one thing for a passenger to be walking and talking on a cell phone, like this gentleman right here," Payne says, nodding at a portly fellow in a ONE TEQUILA, TWO TEQUILA, THREE TEQUILA ... FLOOR T-shirt. But since travelers don't use laptops the way they use mobile phones, Payne knows that every inch of SFO need not be covered. "I think when people are standing in line, they would want to use their PDAs. So we need access there." With clever planning, Payne thinks, every check-in line and boarding area could be wired for less than $750,000 — a pittance compared with the billions that SFO recently spent on a new international terminal.

Payne says SFO would contribute to the cost of a Wi-Fi network in exchange for partial ownership — a subject that gets him grousing about the cellular revolution. When the telcos installed transponders in SFO, pay-phone revenue plummeted. The airport receives an annual fee from the telcos, but has no stake in the network. This situation leaves Payne unable to monitor traffic levels, and so he must take the telcos at their word when the leases are renegotiated. He won't make the same mistake with Wi-Fi — and he wants to deal only with big players. "As an airport, we're public sector, and that means we're planning 5, 10, 30 years down the line," he says. "We don't want to get into business with anyone who's not going to be around two years from now. This is a long-term commitment."

While Wayport and Airpath plead their case to skeptical bureaucrats like Payne, there's little for Boingo to do except evangelize. Dayton likes to cite a Boingo survey where 97 out of 100 business travelers would make plans based on availability of high-speed wireless broadband access. (A recent online poll of Wired readers gave a number closer to 54 percent.) But Payne wants more than survey results. He says customers need a more realistic pricing schedule. He thinks $8 to $10 for a 24-hour connection is in the ballpark; a sliding scale might help — maybe the service should knock off a few bucks if a user just wants to check email for 10 minutes. And then there's this: "My concern is that it won't go forward until people can consolidate all of their wireless services onto a single bill," Payne says.

If that's the challenge, there's little promise for Boingo in depending on partnerships with the Wayports and Airpaths of the world. Sky Dayton needs a plan B.

Stuck in a holding pattern at SFO and several of the country's other major airports, Boingo is trying to ignite a grassroots movement with its $895 "Hot Spot in a Box." The plug-and-play gateway, manufactured by Canada's Colubris and sold at Boingo.com, is designed to appeal to the mom-and-pop business community. Simply jack the box into your DSL, and you're ready to host Boingo subscribers and collect the bounty each time one of them logs on. Boingo's revenue-sharing plan amounts to $1 per connect, plus $20 for every new subscriber who signs up on site. Dayton thinks the owner of a bowling alley or a café will find that kind of money pretty appealing. "I used to own a coffeehouse, and we'd have anywhere from 100 to 500 people a day come in. If you can get 10 or 12 a day using the service, that's $300 to $400 a month," he says.

The trouble with the Hot Spot plan: It assumes that the students, bohemians, and cubicle dwellers who hang at the local Java Hut will shell out $75 a month, or even the $7.95 onetime connect fee. At that price point, Boingo is likely to attract only the wealthiest of m-workers — few of whom spend time discussing Hobbes' Leviathan over cappuccino and a maple-nut scone.

And if coffeehouse owners do find that they can attract customers with Wi-Fi service, they're just as likely to offer it for free as to partner with Boingo. My local laundromat already offers free broadband access at a bank of PC terminals, and would probably think nothing of investing a few hundred in a bargain gateway. OK, so it wouldn't get Boingo's window decals or the $1-per-connect bounty. But the New Wave Laundercenter is in the laundry business — not the ISP business. If it can bring in just one more customer per day with free Wi-Fi, at $1.50 per load and 25 cents for 7 minutes of drying, the gateway could pay for itself in a month. The economics are even more appealing when it comes to $4 lattes or $1,000 airline tickets. If Boingo's survey about business travelers is accurate, it would behoove Airline X to one-up Airline Z by providing free Wi-Fi access at its gates. If just one more passenger flies through each gate per day, the plug-and-play gateways would turn a profit within 24 hours.

Boingo's bet that people will pay for Wi-Fi, then, hinges on America's impatience with anything more complex than left-clicking a mouse. The sleek client software is designed for the techno-ignorant. "With Boingo, it's just as super simple as can be," says Dayton. "You open up the software, you press Connect. Little things like dealing with ASCII versus hex, 128-bit encryption versus 40-bit — users don't want to get into that." If something goes amiss, a phalanx of toll-free operators is ready to assist.

Being newbie-friendly may be Boingo's biggest selling point. Freeware sniffers like NetStumbler and Kismet require users to feel comfortable with command prompts and byzantine dialog boxes — not exactly the fortes of the non-Slashdot crowd. And corporate types may balk at using networks without a reliable, brand-name service provider attached. Only the most idiotic of executives would risk emailing a company's top-secret layoff plans over a network maintained by a stoner coffeehouse barista.

This is where Microsoft comes in. In addition to its handy XP sniffer, the behemoth is developing a free software upgrade that beefs up Windows security and support for 802.11b connections. If Microsoft comes up with an easy-to-use GUI sniffer for its flagship OS — an Internet Explorer to Boingo's Netscape — $75 a month for service will start to seem awfully steep, especially if my misadventures in Manhattan are typical of the Boingo experience.

Perhaps Dayton's biggest problem is that the people he's partnering with don't seem all that loyal. Consider Airpath and Wayport, the two deployment companies he's counting on to build that elusive national Wi-Fi network. Airpath CEO Tim Barrett hints that "some [Boingo] partners aren't going to re-up" their contracts. "It's really hard when you have a company that gets lots of publicity, that has a guy who founded a company that was successful back in 1995, and has a model where they're already selling out to EarthLink," he grumbles, referring to Boingo's deal to provide Wi-Fi access to EarthLink customers.

Boingo's other key partner, Wayport, recently joined an international consortium of wireless ISPs, called Pass-One, which aims to let travelers roam on networks from Canada and the US to Sweden. The deal has Wayport CEO Dave Vucina sounding a lot more like a Boingo competitor than a partner. "I will always have something of a price advantage, because I'm leveraging my own networks," he says. "If I wanted to add 10,000 users next week, it would cost almost nothing." If Wayport wanted to become a Boingo-like aggregator of various nodes, he adds, "I can be in that business in 90 days; it's just a matter of writing the client software."

The deployment firms not partnering with Dayton are even harsher on Boingo's business model. "I don't think they're going to have a lot of luck bringing over EarthLink customers, because you're not talking about executive travelers," says Dick Snyder, senior VP of business development for Concourse Communications, which has installed a Wi-Fi network at the Minneapolis-St. Paul airport and holds the rights to JFK. "The one thing they have done really well is build mindshare. Really, they're just a marketing company."

In mid-July, rumors began to swirl about a wireless venture including AT&T, Verizon, and Cingular, code-named Project Rainbow, which aims to build a nationwide Wi-Fi network. The news couldn't have come at a better time for Dayton because, simply put, Project Rainbow could lessen Boingo's reliance on Wayport and Airpath. It also helps validate all of Dayton's paeans to the technology, all of his bluster about how Wi-FI is the new TCP/IP. If the telcos are licking their chops in anticipation, a real Wi-Fi network could be in the offing. It's the kind of development that SFO's John Payne has been looking for. "No airport wants to be a systems integrator. I want to talk to one person who will handle infrastructure and service, and who knows how to consolidate the billing," he says. "I think, in the end, that's going to be a Verizon or a Sprint."

Regardless of whether Project Rainbow pans out, telcos are bound to incorporate Wi-Fi into their master plans in some fashion. With 3G rollouts slowed by spectrum costs and technical snafus, they're increasingly viewing Wi-Fi as a vital part of the unstrung future. Deutsche Telekom recently purchased MobileStar, folding the Wi-Fi pioneer into its T-Mobile wireless unit. On July 1, NTT DoCoMo began offering an 802.11b service in Tokyo for 2,000 yen ($16.20) per month. Sprint PCS, which launched a high-speed data service in August, was one of Boingo's original investors — a bet that mobile handsets and PDAs may work best if they can roam between Wi-Fi in the cities and 3G networks everywhere else. "Sprint's interest in Boingo is a way to explore the market without getting too close," says Sarah Kim, an analyst with the Yankee Group. "They're not doing this because they like Sky Dayton, or even because they think Boingo is a good idea. It's a way to explore Wi-Fi with a very low-risk strategy, and I don't blame them."

At Boingo, they think of Wi-Fi's role in 3G as filling in the white space. In an urban area where nodes abound, you'll gulp down megabit upon megabit. "Then, as you leave the umbrella of that Wi-Fi concentration, you switch over to 3G," says Dave Farber, a former chief technologist at the FCC and a Boingo board member. "It's not going to be nearly as much bandwidth, but at least I can guarantee it'll work."

As I ponder Boingo's fate in the Project Rainbow world, I'm fiddling with my circa 2000 Sprint PCS phone. It has a 9.6-Kbps Web browser, which I've never dared use for fear that sucking down a single email might cost me $20. But what if my phone featured a streamlined version of Boingo's client software? And what if it cost me only, say, an extra $5 a month for unlimited use, so I could wheel and deal at near-T1 speeds on a moment's notice? I'd fork over the cash without a second thought.

Which gets me thinking: If a middling journalist can figure all of this out, then the visionary behind EarthLink obviously has given it some thought, too. Could it be that Dayton has just been playing the waiting game all along — keeping Boingo's burn rate low, milking early adopters for $75 a month, spewing rhetoric about giving kickbacks to cafés and bowling alleys — until the telcos get around to building a Wi-Fi network? Is he that smart?

Maybe it's not smarts so much as experience. The only real secret to Dayton's "EarthLink model" is knowing how the telcos operate — and invest. For all of Dayton's poetry about partnering with mom-and-pop operations, he's well aware that EarthLink didn't hit the jackpot until Sprint bought a 30 percent stake in 1998. Despite the hippie moniker, Sky Dayton knows that playing the upstart only gets you so far in the business world. The real EarthLink model may be simple — and brilliant: Generate some buzz, wait for the big players to get in the game, cozy up to a partner, and get out of the way.